THE RICH GET….YOUNGER: It stands to reason that older Americans would generally be richer due to the time they have to save money. Thus, according to a recent study by Bloomberg, one third of the country’s wealth is retained by those who are 65 and older. The average age of those in the U.S. with at least $1 million in reserves is 62. However, the average age for those with at least $25 million at their disposal is 47 years-old. The average age of this demographic has dropped by 11 years since 2014. The number of households with $25 million or more has doubled since 2008 from 84,000 to 172,000. The saddest statistic from this study: only 15% of Americans with at least $25 million gave $100,000 or more to charity.
MARKETS COME BACK OFF OF EUROZONE FEARS: Despite a sharp decline in stocks on Thursday, caused largely by negative economic news coming out of Europe (see below), U.S. stocks ended the week slightly positive. The biggest positives for the markets seemed to be individual corporate earnings reports. Fears of an economic slowdown in the fourth quarter led to lowered expectations for earnings. Now that actual earnings are coming in, many are surprising to the upside.
EUROPEAN WORRIES: Demand from China for European goods is weakening. The divorce with the U.K. is proving to be messy. “Yellow vest” protests continue in France. Italy’s national debt is ballooning. Factory output in Germany just recorded its fourth consecutive monthly decline. GDP growth for 2019 is now forecast to be 1.3%, down from the 1.9% forecast just last November.
DIVERSIFICATION: I recently read an article by Craig Israelsen, PhD who works at the Woodbury School of Business at Utah Valley University. He researched the historical performances of five asset allocations for 2018 and for the last 49 years. For one year, cash was the winner. The most diversified portfolio with 70% in the stock market did the worst. He also shows the average, annualized gross return as well as the standard deviation (measure of volatility or risk) during the 49 years. In the last column, he did something very interesting. He assumed that $250,000 was invested in a retirement account, and then he ran calculations to come up with the median ending account balance over 25 rolling 25-year periods. He assumed that 5% ($12,500) was withdrawn from the account in year one with that amount increased by 3% each year (to account for inflation). The total withdrawals in each of the examples below was $469,423. What he found was that the most diversified portfolio* obtained the highest median portfolio balance even though the 100% U.S. stock portfolio had the highest annualized return.
*The 7-asset portfolio consisted of large-cap U.S. stock, small-cap U.S. stock, non-U.S. stock, real estate, commodities, U.S. bonds and cash.
HISTORIC DIVERSIFICATION: https://horsesmouth.com/asset-allocation-a-review-of-the-past-49-years. Steele Systems Mutual Fund Software, calculations by Craig L. Israelsen.
EUROPEAN WORRIES: https://www.wsj.com/articles/eurozone-economy-facing-perfect-storm-11549540396?mod=searchresults&page=1&pos=4
MARKETS COME BACK OFF OF EUROZONE FEARS: https://www.wsj.com/search/term.html?KEYWORDS=eurozone%20economic%20forecasts%20slashed; https://www.wsj.com/articles/global-stocks-stumble-on-weak-data-in-europe-11549529584?mod=searchresults&page=1&pos=1; https://www.wsj.com/articles/global-stocks-waver-as-trade-economic-concerns-linger-11549616072?mod=searchresults&page=1&pos=1
THE RICH GET….YOUNGER: https://www.thewealthadvisor.com/article/rich-are-getting-younger?mkt_tok=eyJpIjoiWVRBd1pqZzNOekUxTlRkaCIsInQiOiJhVTFKT0V0dkVTTWh6Z0YyTVcyVVBSMWVESW5lRTduKzBLWlljWnFWOXZMSVlIbjRDMllUb1krZk9cL2xqSnF1bVNcL0RSa2RScGlhM053cFlSSjhub3puS25oQ29MTEFKdVFTaEdQYW94dXhYRHZlK2lXeDA0NkhHVzBWd3hIMnJzIn0%3D